Budgeting for Success
Budgeting for success: key lessons from Henry v News Group Newspapers
Henry v News Group NewspapersSCCO (Senior Costs Judge Hurst) 16/05/2012 is the first significant judicial ruling in the costs management regime.
In this case, the Claimant brought libel proceedings (falling under the defamation costs management pilot scheme which is governed by Practice Direction 51D) which were settled shortly before trial on terms including that the Defendant pay the Claimant’s costs.
Both parties had submitted costs budgets in September 2010 which had been approved at a case management conference. Over the next eight months the Defendant had amended its defence four times, made a number of third party disclosure applications and had served ten supplemental lists of documents. Work done by the Claimant’s solicitors on witness statements and disclosure was respectively 18 times and 8 times higher than the figures given in the budget. As a result, the Claimant’s solicitors exceeded their budget - by some £270,000 - but failed to advise the Defendant that they had done so.
The stage was set for the Court to examine the question of what constitutes a “good reason” to depart from the budget figures.
Chief Master Hurst in assessing the case held that it was a mandatory requirement of the Practice Direction to notify one’s opponent if the budget was to be exceeded. Whilst he agreed that a significant amount of work resulted from events that arose after the budget had been set, the key question was whether the Claimant had complied with the requirements of the Practice Direction. It was concluded that, by not advising the Defendant of the likely overspend nor submitting an application to amend the costs budget, the Claimant had simply failed to engage with the process of costs management. Conversely, the Defendant had informed the Claimant that its budget was likely to be exceeded. There was therefore no “good reason” to depart from the Claimant’s budget.
Costs budgeting is likely to arise in more and more cases. Henry demonstrates that solicitors who cannot find a reliable method of monitoring adherence to budgets are going to be vulnerable in the brave new world of costs post-Jackson.
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